Hong Kong Stock Exchange Traded Funds (ETFs) surged by 200%! Foreign capital of USD 2.4 billion poured into Chinese blue-chip stocks. Can the National Day market continue to rise?

During the National Day holiday, although the A-share market was closed, the enthusiasm for investment did not diminish. The Hong Kong stock market and ETF products performed well, with the Bosera CSI Hong Kong 50 ETF (HK2832) soaring by over 208.73% since September 24, setting a remarkable new high. At the same time, overseas investors' enthusiasm for Chinese assets continued to rise, with iShares China Large-Cap ETF (FXI) seeing a historical high weekly net inflow of $2.4 billion. These phenomena have sparked keen market attention on the post-holiday A-share trend.

Hong Kong tech stocks show resilience, attracting continuous capital inflows

During the National Day holiday, the Hong Kong stock market performed impressively, with the Hang Seng Index and the Hang Seng Tech Index rising by 9.3% and 13.36% respectively. The semiconductor sector stood out, with both SMIC and Hua Hong Semiconductor seeing gains of over 50%. Lin Xuechen, fund manager of the Xingyin Fund Index and Quantitative Investment Department, stated that the core targets of the Hong Kong stock market are tech stocks, with many tech companies, especially internet firms, demonstrating strong resilience, giving investors full confidence. Additionally, the valuation levels of Hong Kong stocks are still much lower than other emerging market targets, making it easy to attract incremental capital inflows as long as positive signals emerge.

Optimistic sentiment from foreign capital, A-shares expected to see a rally

Shanxi Securities pointed out that in terms of the price comparison between Hong Kong stocks and A-shares, the progress of the Hong Kong stock market has outpaced that of A-shares during the National Day holiday, with the premium falling to the lowest percentile in 20 years. This "non-stop capital" phenomenon demonstrates foreign optimism towards the Chinese market, with bullish forces still at play. It is worth noting that iShares China Large-Cap ETF (FXI) saw the largest single-week net inflow of funds in history, amounting to $2.4 billion, from September 28 to October 4, with total assets under management surging to $7.8 billion. This further confirms foreign enthusiasm for Chinese equity assets. Based on this, the market generally expects A-shares to potentially rise after the holiday to repair the price comparison with Hong Kong stocks.

In this market trend, investors should closely monitor the performance of Hong Kong stock ETFs. Strong performers like the Bosera CSI Hong Kong 50 ETF (HK2832) have become market hotspots and may attract more capital inflows in the future. Additionally, Citic Securities recommends focusing on non-bank financial sectors benefiting from loose monetary policies, as well as real estate and capital market stimulus policies, along with consumer and technology-related industries, which may have better performance in the future.

Overall, the strong performance of the Hong Kong stock market during the National Day holiday and the continuous inflow of foreign capital have laid the groundwork for the post-holiday A-share market. Investors should closely monitor market trends and seize potential investment opportunities. However, it is also important to be cautious of the risks that overheated market sentiment may bring and maintain a rational investment attitude